Recently, a new category of crypto, named Metagovernance, has emerged on CoinGecko. Despite comprising only three tokens, its market cap has been increasing drastically. Today, we discuss on what Metagovernance means, along with the reasons for its meteoric rise.
What Is Metagovernance?
Simply put, Metagovernance activity occurs when:
- DAO #1 holds a significant amount of DAO #2’s tokens.
- DAO #1 is then able to vote on DAO #2’s proposals.
To quote a real life example, let’s look at Convex Finance.
Currently, Convex ($CVX) reigns as the largest market cap token in the Metagovernance category. As of today, it is up 14.7% and its price is at $7.31. But, what does Convex Finance do for its users?
Convex Finance
Basically, Convex is a platform for boosting rewards on Curve Finance. Its target audience includes:
- Liquidity providers (LP) on Curve ($CRV), and
- $CRV stakers.
In addition, Convex aims to simplify the liquidity provisioning and $CRV staking processes. But, why is Convex needed? Why can’t I just provide liquidity or stake directly on Curve?
Let’s look at this from the perspective of an LP. If you deposit liquidity directly on Curve, you will need to lock $CRV to get boosted rewards. But, if you deposit your liquidity on Convex, you can enjoy boosted rewards without locking $CRV. This is because Convex already owns a large amount of $CRV. As an LP, you are “piggy-backing” off Convex’s $CRV bags for boosted rates.
Now, consider this if you’re a $CRV staker. You could either:
- Stake your $CRV with Curve or
- Stake your $CRV with Convex and receive the following benefits:
- Staked $CRV remains liquid through the cvxCRV token.
- Receive boosted $CRV rewards with paired LPs.
- Receive Convex’s native token ($CVX) as rewards too.
The choice is obvious here, especially if you’re not a $CRV whale.
Now that you’ve understood Convex’s value, lets head back to our definition of Metagovernance. In this case, Convex can be seen as DAO #1, and Curve can be seen as DAO #2. As a Metagovernance project, Convex is bringing more liquidity and users to Curve with the above benefits.
Yet today, the Metagovernance category of Coingecko only comprises “DAO #1”- type of tokens. This leads us to our next question. What makes tokens such as $CVX valuable?
The Rise of Metagovernance Projects
The main utility of tokens like $CVX is for governance. The more $CVX you hold, the more say you’ll have in the Metagovernance of Curve and other projects. It also acts as a reward token for users of Convex.
Now, why did the prices of these projects ($CVX, $BTRFLY, and $INDEX) increase so much this month? In my opinion, there could be three main reasons:
- The project’s TVL has increased. As TVL increases, there is more retail interest in the project’s token. This reflects in the price itself. For this, let’s look at the statistics:
- $CVX – TVL (month-to-date) – Increase of 27% from $3.05 billion to $3.86 billion.
- $BTRFLY – TVL (month-to-date) – Increase of 2% from $2.21 million to $2.26 million.
- $INDEX – TVL (month-to-date) – Increase of 42% from $57 million to $80.81 million.
- The project has announced new features or milestones. Take Convex, for example, who tweeted their new milestone below. Indeed, being able to lock up so much $CRV within Convex is a great attestation to their success.
Great day for $CRV locks! 🔓🔒 pic.twitter.com/KIfUfPxBkY
— Convex Finance (@ConvexFinance) July 2, 2022
3. The project has benefited from the current narrative. With the bankruptcy of Celsius and many other centralized crypto institutions, DeFi is slowly regaining public confidence. This means that retail is looking to deposit their crypto in places like Aave, Compound, and Curve. Naturally, Metagovernance projects like Convex would also catch their eye.
Conclusion
To summarize, the list of Metagovernance projects will only expand in the future. Indeed, there are more than just three projects in the market today. Terra’s Apollo DAO, Avalanche’s Vector Finance, and Fantom’s Volta DAO are all examples of such projects.
In addition, their use cases will expand as well beyond just attracting users and liquidity. Well, what else could Metagovernance projects do? To find out more, you’ll just have to keep up with the blistering pace of DeFi.
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